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by sayum
18 April 2026 7:45 AM
"GDCL was at best a custodian/trustee — it had no right to sell off the properties of JUL or its subsidiary", In a sweeping judgment that closes the book on nearly four decades of industrial misery, the Supreme Court has stripped Gannon Dunkerley & Co. Ltd. of any legal authority over the assets of Jaipur Udyog Ltd., declared illegal the company's clandestine manipulation of a subsidiary's shareholding pattern, set aside the sale of scrap from the Sawai Madhopur Unit, and appointed a former Chief Justice as Court Administrator to ensure workmen receive their dues — aggregating approximately ₹163 crores — by 31.08.2026.
A bench of Justice Rajesh Bindal and Justice Vijay Bishnoi delivered the judgment in a writ petition filed by Bhartiya Mazdoor Sangh, holding that GDCL had been conducting itself as a self-styled owner of JUL's assets when it was, in law, nothing more than a custodian — and a faithless one at that.
Background of the Case
Jaipur Udyog Ltd. operated a cement factory at Sawai Madhopur, Rajasthan and a jute mill at Kanpur. Declared a sick industry by the Board for Industrial and Financial Reconstruction on 17.09.1987, JUL was placed under a rehabilitation scheme sanctioned by BIFR on 21.04.1992, under which GDCL was to take over management and revive the unit. The scheme failed of implementation. BIFR recommended winding up of JUL on 24.11.2000.
The appeal against that recommendation abated with the repeal of SICA on 01.12.2016 and the enactment of the Insolvency and Bankruptcy Code — because neither JUL nor GDCL filed any application before the NCLT within the prescribed 180-day window. The winding up recommendation thus attained finality subject to the Rajasthan High Court's approval. Throughout this period, thousands of workers of both units remained unpaid for over three decades.
The writ petition was filed in 2015 seeking implementation of the award of Justice N.N. Mathur (Retd.), which had computed workmen's dues. Justice Aftab Alam (Retd.) was subsequently appointed mediator, and his 2021 report calculated dues of approximately ₹115 crores for the Rajasthan unit alone, with an additional ₹48 crores outstanding for Kanpur Jute Mill workers.
Legal Issues
The Court was required to examine: whether GDCL had any legal authority to deal with JUL's assets after BIFR's winding up recommendation and the abatement of the appeal; whether GDCL's manipulation of the shareholding pattern of Jai Agro Industries Ltd. — JUL's 99.99% subsidiary — was legal; whether properties sold by GDCL without court permission could be set aside; whether the Article 142 power could be invoked to condone GDCL's illegalities as prayed; and how the long-suffering workmen could finally be paid.
Court's Observations and Judgment
GDCL Was a Custodian — Nothing More
The Court traced GDCL's entire conduct with meticulous reference to the original file and proceeding notes. What emerged was a picture of a company that had consistently defaulted on its financial commitments under the rehabilitation scheme, never genuinely revived the unit, and — once it became clear the winding up recommendation had attained finality — proceeded to deal with JUL's assets as though they belonged to it.
The Court noted that the AAIFR's order of 11.11.1994 had only transferred management of JUL to GDCL — not ownership. Even that management authority lost its legal foundation when BIFR recommended winding up in 2000 and the appeal against that recommendation abated with the repeal of SICA.
"After repeal of SICA and no proceedings having been initiated before NCLT within the time permitted, the appeal filed by GDCL/JUL before the AAIFR stood abated. Thus, the recommendation made by the BIFR for winding up of JUL revived. As a result, GDCL had lost any locus to deal with the properties of JUL and JAIL."
GDCL is a professionally managed company that had been handling multiple litigations relating to JUL. The Court rejected outright the claim of ignorance about the 180-day IBC filing requirement. The failure to file was deliberate or grossly negligent — either way, its consequences could not be undone.
Sales Without Court Permission: A Pattern of Illegality
The Court found that GDCL had sold multiple assets of JUL and its subsidiary JAIL without seeking permission from this Court or following any court-supervised process:
The Kanpur Jute Mill was sold by registered sale deed dated 07.06.2024 for ₹51 crores — a figure that applicants alleged was a gross undervaluation of a property worth ₹150 crores. GDCL's counsel could offer no explanation beyond an apology. Two properties of JAIL were sold for ₹21 crores (April 2021) and ₹2.84 crores (September 2022), sale proceeds of which remained with GDCL without ever being brought to the Court's notice. Scrap of the Sawai Madhopur Unit was sold by private negotiation without auction, and the proceeds were retained by GDCL.
"Such an illegality cannot be condoned by any stretch of imagination. Mere deposit of the sale proceeds in this Court, that too only when the same was pointed out by opposite counsel, will not come to the rescue of GDCL."
While the Court declined to set aside the Kanpur Jute Mill sale and the two JAIL property sales — as the buyers' rights required hearing in compliance with natural justice — it set aside the sale of scrap of the Sawai Madhopur Unit. Since the scrap had not yet been lifted and the sale consideration remained with GDCL, GDCL was directed to refund the amount with interest at 8% per annum within two months.
The JAIL Share Manipulation: Declared Illegal
One of the most startling revelations in the judgment was GDCL's clandestine restructuring of Jai Agro Industries Ltd., which was a 99.99% subsidiary of JUL. Without any permission from BIFR or this Court, GDCL issued fresh shares in JAIL to its own group companies — United India Agencies Pvt. Ltd., Abhyuday Investments Ltd. and M.R. Holdings Pvt. Ltd. — in 1998 and 1999, thereby diluting JUL's shareholding from 99.99% to 33.33% and making GDCL's group the effective majority shareholder in JAIL.
The Court found this manipulation to be without any legal basis. JAIL was never part of the rehabilitation scheme — its assets were never factored into the BIFR process, which the Court termed "a patent error in the entire process which goes to the route of the case and in our opinion, is also incurable."
"Any allotment of new shares by GDCL to its group companies has to be declared illegal. Ordered accordingly."
The Court also noted that GDCL had in 2017-18 transferred the entire shareholding of JUL itself to its associate companies — and reversed this only after objections were raised by lenders.
Article 142 Cannot Launder Illegalities
GDCL invoked Article 142 of the Constitution, urging the Court to iron out creases and condone its illegalities — arguing that since it had cleared all of JUL's debts, it legitimately expected ownership of JUL and its assets to vest in it. The Court firmly rejected both the legal and factual premises of this argument.
"Power under Article 142 of the Constitution cannot be invoked to condone the illegalities committed. It is not a case where merely ironing of creases is required; rather, it will require condoning a number of illegalities, which cannot be done."
The Court also rejected the plea of legitimate expectation. Citing the Constitutional Bench decision in Sivanandan C.T. v. High Court of Kerala, the Court held that legitimate expectation is not a legal right and cannot override established illegalities. GDCL had been in management for 13 years without reviving the unit. No legitimate expectation could arise from a failed custodianship.
The Unit Cannot Be Revived — Only Assets Remain
The Court recorded the impossibility of revival with clinical finality. The Sawai Madhopur area had been declared forest land vide notification dated 30.11.1984. The mining lease had expired in 1989. The limestone mining necessary for cement manufacture was prohibited under the Rajasthan Forest Act. The machinery had rusted into uselessness. Tellingly, even GDCL's own proposed "revival scheme" did not propose reviving the cement unit — it proposed a hotel, solar plant, and cold storage instead.
"As on today, the rehabilitation or restart of the unit is a factual impossibility, and only the assets of JUL and its subsidiary, JAIL, are available to satisfy the long-standing dues of the workmen."
The Court also noted that all workers of JUL may have since attained the age of superannuation — meaning the children of workers have no enforceable right to employment, only their elders' unpaid wages.
Winding Up Recommendation Rendered Infructuous
Company Petition No. 21 of 2001 pending before the Rajasthan High Court — registered on BIFR's winding up recommendation — was disposed of as infructuous. The Court found that since all debts of JUL now stood cleared, the very basis for the winding up recommendation no longer survived. The petition was accordingly disposed of.
Complete Justice Through Article 142 — For the Workers
While declining to invoke Article 142 for GDCL, the Court wielded that power in favour of the workers. Noting that workmen of both the Sawai Madhopur Cement Plant and the Kanpur Jute Mill had remained unpaid for over three decades, the Court held that the only just course was to ensure time-bound payment from JUL's and JAIL's assets.
Approximately ₹193.75 crores now lies deposited with this Court including ₹166 crores directly deposited and interest accrued. This, along with the asset base of JUL and JAIL, is to be applied first towards clearing all workmen dues by 31.08.2026.
Court Administrator Appointed
For the purpose of overseeing the entire compliance exercise, the Court appointed Justice Manindra Mohan Shrivastava, former Chief Justice of the Madras High Court, as Court Administrator. The Administrator is empowered to engage staff, call for records from government offices, avail experts for asset valuation, and oversee the disbursement process in coordination with court commissioners. A monthly honorarium of ₹2 lakhs and an additional ₹2 lakhs per month for staff and expenses were directed. ₹50 lakhs from the ₹1 crore retained in escrow is placed at the Administrator's disposal.
EPFO was directed to be looped in for calculation and payment of provident fund dues. Workers still occupying over 1,600 houses and flats at the Sawai Madhopur unit were directed to hand over possession six months after their dues are cleared, with no liability for use and occupation in the interim given the decades of unpaid wages.
Date of Decision: April 15, 2026
